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I-Team: Cryptocurrency miners need approval from ERCOT to plug into Texas grid

CBS Dallas logo CBS Dallas 4/9/2022

DALLAS (CBSDFW.COM) - Texas cryptocurrency miners must now get approval from ERCOT to connect to the state's power grid.

State regulators said the new requirement is to ensure new large loads do not overwhelm the grid.

Ever since China began cracking down on Bitcoin mining, miners have been rushing to Texas to take advantage of the state's cheap power prices, tax incentives, as well as the ability to connect to the grid quickly.

In the next two years, cryptocurrency mining operations are expected to quadruple in Texas, according to the Texas Blockchain Council. This would put the Lone Star state on track to become the world's largest producer to Bitcoin in less than two years.

Whinstone, Rockdale, TX Brian New/CBS 11 News © Provided by CBS Dallas Whinstone, Rockdale, TX Brian New/CBS 11 News

"This will put a massive amount of stress on the Texas energy grid," said William Magnuson, the author of Blockchain Democracy and a cryptocurrency legal expert at the Texas A&M Law School. "We know the Texas energy grid has had its struggles in the last couple of years so I do worry about the effects of imposing massive new energy use on a grid that we know is has been relatively unstable."

During the 2021 deadly winter storm, millions of Texans went without power for days as the Texas grid failed in the freezing conditions to keep up with the demand.

In the past year, steps have been taken to increase the power grid's capacity and to winterize power plants.

Still, many energy experts believe the Texas grid remains vulnerable and a rush of high energy using cryptocurrency mining facilities could further stress the grid.

A typical large crypto mining facility houses tens of thousands of high-powered computer servers, referred to as "miners." These miners operate around the clock competing with other miners to solve complex math equations. The computer that solves the problem first produces a new Bitcoin and then is rewarded with Bitcoins for themselves.

The electricity it takes to produce a single Bitcoin is equivalent to amount used to power an average Texas home for 62 days.

Magnuson said ERCOT's new approval process for large cryptocurrency mining facilities is a good start but added it's what state regulators do with the information they learn from the studies that will be key.

"How are they going to weigh the costs and benefits of adding this new mining companies to the grid? That is where the rubber meets the road," he said.

Lee Bratcher, the president of Texas Blockchain Council, said he views the new approval step as an opportunity to share with ERCOT how cryptocurrency miners can strengthen the grid.

"We actually see this approval process as a positive development," he said.

By using electricity that might otherwise go wasted during low demand times and then powering down during peak demand times, Bratcher said Bitcoin miners will attract additional power generators to the state while offering flexibility to stabilize the grid.

In many cases, Bitcoin miners can make money when turning their power off by selling their electricity back to the grid when demand is high.

"Bitcoin mining is not going to solve all the grid's problems, but it is a part of the solution to be sure," Bratcher said.

BARCELONA, SPAIN - OCTOBER 15: Mining cryptocurrency is the process of investing computational capacity to process transactions. Manuel Medir / Getty Images © Provided by CBS Dallas BARCELONA, SPAIN - OCTOBER 15: Mining cryptocurrency is the process of investing computational capacity to process transactions. Manuel Medir / Getty Images

Some cryptocurrency miners have expressed concern about how long the approval process could take.

ERCOT officials told the CBS 11 I-Team, "The time ERCOT takes for its interim review will vary depending on the site and what concerns may be identified. Each study is based on the unique circumstances it presents."

ERCOT officials and cryptocurrency miners are expected to meet later this month to hash out the details of the new approval process.

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